Correlation Between Walmart and Capital Group

Can any of the company-specific risk be diversified away by investing in both Walmart and Capital Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walmart and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Capital Group Growth, you can compare the effects of market volatilities on Walmart and Capital Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walmart with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Capital Group.

Diversification Opportunities for Walmart and Capital Group

0.93

Correlation Coefficient

Walmart  Capital Group

Almost no diversification

The 3 months correlation between Walmart and Capital is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Capital Group Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Growth and Walmart is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walmart are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Growth has no effect on the direction of Walmart i.e., Walmart and Capital Group go up and down completely randomly.

Pair Corralation between Walmart and Capital Group

Considering the 90-day investment horizon Walmart is expected to generate 1.01 times more return on investment than Capital Group. However, Walmart is 1.01 times more volatile than Capital Group Growth. It trades about 0.2 of its potential returns per unit of risk. Capital Group Growth is currently generating about 0.12 per unit of risk. If you would invest  7,953  in Walmart on October 8, 2024 and sell it today you would earn a total of  1,125  from holding Walmart or generate 14.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Capital Group Growth

Walmart

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capital Group Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Growth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Capital Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and Capital Group

The main advantage of trading using opposite Walmart and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Capital Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Capital Group will offset losses from the drop in Capital Group's long position.

The idea behind Walmart and Capital Group Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.